After six years, Ram Sharan Mahat is back at the Finance Ministry. And, his appointment as new Finance Minister has cheered the private sector and investors.
It’s his pro-market image that has made the private sector optimistic.As an economist and five-time Finance Minister, Mahat knows well what has ailed the economy and what needs to be done.
Along with his pro-market image, the major advantage Mahat has is the private sector, foreign investors and donors all trust him. But structural problems of economy and the Finance Ministry have remained almost the same when he left the ministry in 2008. The government still struggles to spend the capital budget, trade deficit is ever expanding and the GDP growth target is missed every year.
Mahat assumes the Finance Ministry at a time when the government is struggling to expedite development expenditure and banks and financial institutions are flush with excess liquidity. With seven months of the fiscal year already gone, capital expenditure is still below 20 percent while the government treasury has Rs 65 billion. Hence, expediting government spending will be his immediate challenge. Joining his office on Tuesday evening, Mahat has already sent a stern signal, saying the budgets allocated to under-performing ministries will be cut.
Economist Posh Raj Pandey said increasing capital expenditure is the biggest challenge for the new Finance Minister in the short term. “Controlling inflation and better utilising the liquidity in the banking sector are other two immediate challenges for Mahat,” he said. Currently, inflation is close to double digits at 9.7 percent as of mid-January.
One of the architects of the economic reforms of the 1990s, his next challenge will be restarting the stalled reform process. Currently, the economic reform agenda has taken a back seat mainly due to political parties’ divergent opinions. Not a single privatisation has taken place since 2008, when 8 percent shares of Nepal Telecom were issued to the public.
Mahat has expressed his readiness to take forward the second round of economic reform. “It’s high time that we take forward the second round of reforms and the government is committed to do so in partnership with the private sector,” Mahat said, inaugurating the Nepal Economic Summit on Monday.
Economists have backed Mahat’s position on economic reforms. “It is necessary for once again taking the country towards high growth trajectory and create more employments within the country,” said Rameshore Khanal, former finance secretary.
Given the major political parties converging on the idea of a private sector-led economy, Khanal believes it is the right time to take ahead the second generation of reforms, and Mahat is the right man to do so if he dares.
Pandey echoes Khanal. “With two pro-market political parties (Nepali Congress and CPN-UML) at the helm of the government, the government could do well if it starts the second generation of reforms,” Pandey said.
Among the areas where the reforms are required, according to Khanal, are endorsement of Special Economic Zone (SEZ) Act, labour law, new insurance Act, Act to guide commodity market, ending unnecessary subsidies on petroleum and completing hydropower projects by addressing their problems.
In the medium- and long-run, the new finance minister faces challenges such as improving business climate by improving the law and order situation, ending load-shedding and narrowing down the burgeoning trade deficit, which stands at as high as Rs 288.76 billion as of the first half of the fiscal year.
Pandey stressed on the need for reforms in governance in order to ensure faster delivery of services to the general public and the private sector, and enabling environment for the private sector to invest in the infrastructure sector.
Before initiating these reforms, Khanal says the new finance minister must end extortion in the coordination with the Home Minister. “Improving business climate is a must in order to ensure increased investment from the private sector which the country desperately needs,” he said.
Economist Bishwombher Pyakuryal said Mahat could do a lot if he works based on the common policies of the political parties mentioned in their manifestoes. “It is necessary to find out structural problems of specific priority sectors such as hydropower, agriculture and tourism, and address them,” he said.
source: the kathmandu post,26 feb 2014
LINK
It’s his pro-market image that has made the private sector optimistic.As an economist and five-time Finance Minister, Mahat knows well what has ailed the economy and what needs to be done.
Along with his pro-market image, the major advantage Mahat has is the private sector, foreign investors and donors all trust him. But structural problems of economy and the Finance Ministry have remained almost the same when he left the ministry in 2008. The government still struggles to spend the capital budget, trade deficit is ever expanding and the GDP growth target is missed every year.
Mahat assumes the Finance Ministry at a time when the government is struggling to expedite development expenditure and banks and financial institutions are flush with excess liquidity. With seven months of the fiscal year already gone, capital expenditure is still below 20 percent while the government treasury has Rs 65 billion. Hence, expediting government spending will be his immediate challenge. Joining his office on Tuesday evening, Mahat has already sent a stern signal, saying the budgets allocated to under-performing ministries will be cut.
Economist Posh Raj Pandey said increasing capital expenditure is the biggest challenge for the new Finance Minister in the short term. “Controlling inflation and better utilising the liquidity in the banking sector are other two immediate challenges for Mahat,” he said. Currently, inflation is close to double digits at 9.7 percent as of mid-January.
One of the architects of the economic reforms of the 1990s, his next challenge will be restarting the stalled reform process. Currently, the economic reform agenda has taken a back seat mainly due to political parties’ divergent opinions. Not a single privatisation has taken place since 2008, when 8 percent shares of Nepal Telecom were issued to the public.
Mahat has expressed his readiness to take forward the second round of economic reform. “It’s high time that we take forward the second round of reforms and the government is committed to do so in partnership with the private sector,” Mahat said, inaugurating the Nepal Economic Summit on Monday.
Economists have backed Mahat’s position on economic reforms. “It is necessary for once again taking the country towards high growth trajectory and create more employments within the country,” said Rameshore Khanal, former finance secretary.
Given the major political parties converging on the idea of a private sector-led economy, Khanal believes it is the right time to take ahead the second generation of reforms, and Mahat is the right man to do so if he dares.
Pandey echoes Khanal. “With two pro-market political parties (Nepali Congress and CPN-UML) at the helm of the government, the government could do well if it starts the second generation of reforms,” Pandey said.
Among the areas where the reforms are required, according to Khanal, are endorsement of Special Economic Zone (SEZ) Act, labour law, new insurance Act, Act to guide commodity market, ending unnecessary subsidies on petroleum and completing hydropower projects by addressing their problems.
In the medium- and long-run, the new finance minister faces challenges such as improving business climate by improving the law and order situation, ending load-shedding and narrowing down the burgeoning trade deficit, which stands at as high as Rs 288.76 billion as of the first half of the fiscal year.
Pandey stressed on the need for reforms in governance in order to ensure faster delivery of services to the general public and the private sector, and enabling environment for the private sector to invest in the infrastructure sector.
Before initiating these reforms, Khanal says the new finance minister must end extortion in the coordination with the Home Minister. “Improving business climate is a must in order to ensure increased investment from the private sector which the country desperately needs,” he said.
Economist Bishwombher Pyakuryal said Mahat could do a lot if he works based on the common policies of the political parties mentioned in their manifestoes. “It is necessary to find out structural problems of specific priority sectors such as hydropower, agriculture and tourism, and address them,” he said.
source: the kathmandu post,26 feb 2014
LINK
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